A funeral trust lets people make arrangements to pay for their burial before they die. Putting funds into a funeral trust can help relieve your loved ones of making difficult decisions while they’re mourning. A funeral trust can also help expand or preserve your access to Medicaid benefits.
What Funeral Trusts Do
The average funeral, from viewing to burial, costs approximately $10,000. Often, family members lack the immediate cash to cover these expenses up front. A funeral trust can take the pressure off your loved ones. When you establish a funeral trust, you transfer control of assets—such as cash money or investment proceeds—into the trust’s control. Once you pass away, the trust will help pay your funeral expenses in accordance with your wishes. A trust can pay for expenses, including:
- Cremation or embalming
- Coffin, casket, or an urn
- Burial plot
- Clergy fees
- Obituary notice
- Attendee transportation
Funeral trusts have an additional benefit: if you depend on Medicaid but are not sure you fall below the program’s asset limit, transferring funds to a funeral trust may preserve eligibility for continued benefits.
Two Types of Funeral Trusts
Funeral trusts can be divided into two categories:
- Revocable funeral trusts
- Irrevocable funeral trusts
The difference between a revocable and irrevocable funeral trust relates to control. If you set up an irrevocable funeral trust and transfer assets to its possession, they will be maintained by a trustee. You will not be able to revoke or otherwise rescind the agreement.
Since you no longer have direct control over the assets in an irrevocable funeral trust, you can write off the assets when applying for Medicaid or a Medicaid extension.
When you establish a revocable funeral trust, you keep control of your assets and retain the right to terminate the trust whenever you please. You can dissolve the contract whenever you wish.
However, a revocable funeral trust will not help you keep Medicaid benefits.
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